Answer: indicated value of the subject property using direct capitaliation is = $390,351= $390,000
Explanation:The abstracted going-in capitalization rates from the four properties will be calculated using
The going-in cap rate which is first-year net operating income (NOI) divided by the initial investment or purchase price
For Comparable 1: 55,000/ 500,000= 0.110
Comparable 2: 50,400/420,000= 0.120
Comparable 3: 53,400/ 475,000=0.112
Comparable 4: 69,000/600,000= 0.115
Calculate the Simple Ave. we have 0.110+0.120+0.112+0.115/4= 0.114
The simple average of the four comparable cap rates is 0.114. Therefore the indicated value of the subject property is $390, 351 gotten from
($44,500 / 0.114) = $390,351= $390,000
